Management Thoughts for Entrepreneurs

An Entrepreneur client of mine is a passionate, innovative CEO with a bias for action.

While a seasoned executive will take a calm, thought-out approach to decision-making, akin to “Ready, Aim, then Fire,” my client likes to make quick decisions rather than deliberate for very long. He jokingly calls his approach “Fire, Aim and then worry about whether you are Ready or have correctly Aimed or not.”

Who is right? Entrepreneurs need to carefully blend both styles of decision-making depending on the situation at hand or surround themselves with advisors who can complement the Entrepreneur’s decision-making style. No one style is always correct!

Entrepreneurs, are you faced with any of these situations in your company?

Employees do not take time off; changes in lifestyle of employees; living beyond their means; possessive of their work; missing documents; books out of balance; delayed deposits; records not organized; duplicate payments; payments to same individuals, numerous times; and so on.

These are warning signs of potential fraud or unacceptable behavior. Time to check things out!

We have previously commented on “Human Asset Management” reflecting on the importance of managing your employees.

Sometimes Entrepreneurs are too loyal to all their employees neglecting to “pull out the weeds.” Any organization has some employees that are not contributing as expected to the goals of the company, are disruptive, below par, or bad hires.

Entrepreneurs might want to give them the benefit of doubt and work to improve the performance or attitude of such employees. However, waiting too long can have an adverse impact on the rest of the team.

Confront and resolve situations with problem employees promptly, otherwise “the weeds can get out of control.”

Entrepreneurs have interesting thoughts on an annual Budgeting process.

Some Entrepreneurs believe that they can control the “budgeting” process in their head and don’t need a formal process. In their view, it is cumbersome and puts too much burden on preparing the budget and reporting actual results against it.

Others embrace the budgeting concept and have their leadership team involved in preparing the annual budgets for each functional area and the company. The monthly results are measured against the budget and variances are analyzed to improve performance. Entrepreneurs who adopt Pay for Performance use the budgeting process to establish performance targets.

The Budgeting process could be used by Entrepreneurs to effectively manage performance. You might want to consider that!

Entrepreneurs are generally full of new ideas, but having a different perspective or viewpoint in generating fresh thoughts is productive.

Where should these new ideas be coming from?

Don’t forget your stakeholders. They are often the best sources of fresh ideas as they know your business better than other parties. Reach out to them and you will be surprised at the barrage of new perspectives.

As Entrepreneurs set up separate business units to grow their companies, holding managers of such units responsible for P&L results becomes important. Most compensation systems reward business unit managers based on P&L results.

If the business units are totally separate and self-contained, the P&L is mostly complete, eliminating the need for allocating any overhead costs.

However, if the business unit receives significant support from corporate staff, such as Accounting, IT, HR, Marketing and so on, or shares office space, then an allocation of such support/space costs to the business unit P&L seem fair. The objective would be to evaluate the business unit results as an independent unit.

Corporate overhead allocations are often controversial, so care should be given to making them as fair as possible when such allocations are necessary.

Entrepreneurs, as you build your companies, have you identified your key stakeholders? If so, have you developed a plan to build and maintain relationships with them?

There are many stakeholders for each company – such as shareholders, customers/clients, suppliers, employees, bankers, accountants, consultants and advisors, local community leaders, industry colleagues, lobbyists, and so on.

Identifying your key stakeholders and having a comprehensive plan of maintaining strong relationships with them is critical for your long term success.